Fellows v Specialist Anodising Company Ltd & Ors

Relief for unfair prejudice is assessed at the date of the hearing. Past proposals which were not implemented do not establish unfairly prejudicial conduct, and relief is unavailable where there is no current prejudicial conduct or proposed act.

An appellate court should not substitute its own assessment of documentary evidence for a trial judge’s evaluation of witnesses and credibility unless there is a realistic prospect of demonstrating error. A procedural irregularity is not established merely because a judge prepared a draft judgment after written submissions, provided the judge hears subsequent oral submissions and considers whether amendments are required.

The applicant, a shareholder and former director of Specialist Anodising Company Limited, petitioned under section 459 of the Companies Act 1985. He alleged unfair prejudice arising from proposed loan write-offs, management charges, conduct connected with an Inland Revenue investigation, litigation, and a purportedly sham share-sale agreement.

His petition was dismissed by His Honour Judge Behrens on 25 October 2001. The applicant sought permission to appeal, alleging errors in the assessment of evidence, failure to address the company’s potential liability to the Inland Revenue, and procedural irregularity in the preparation and delivery of the judgment. The central issues were whether the alleged conduct amounted to unfair prejudice and whether any proposed appeal had a real prospect of success.

1. Permission refused. The application had no real prospect of success and was dismissed.
2. Under section 459 of the Companies Act 1985, the court assesses the company’s affairs at the date of the hearing. Proposals which were never implemented do not themselves constitute actual unfair conduct. Where no current prejudicial conduct or proposed prejudicial act exists, the statutory basis for relief is absent.
3. The judge was entitled to conclude that the proposed loan write-offs had not been insisted upon, that the relevant loans remained enforceable, and that no unfair prejudice had in fact been caused or threatened. The reasoning was consistent with the analogy drawn from Re Astec plc [1998] 2 BCLC 556, where a shareholder’s case was undermined after the alleged refusal to pay dividends was not maintained.
4. The appellate court was not realistically able to replace the trial judge’s assessment of the documents with its own where the conclusion depended materially on hearing and evaluating witnesses, including the judge’s favourable assessment of Mr Wigley.
5. An order requiring the sale of shares would in any event have been disproportionate on the basis of approximately £33,000 in allegedly inappropriate management charges, particularly where the judge accepted an assurance that wrongly made charges would be repaid.
6. No procedural irregularity arose from the judge’s preparation of a draft judgment following written submissions. The parties chose to make oral submissions without seeing the draft. The judge had stated that he would amend it as appropriate, and there was no reason to doubt that he had considered those submissions.
7. The court also criticised the applicant’s 65-page skeleton argument. Under paragraph 5.10 of the practice direction supplementing Civil Procedure Rules Part 52, an appeal skeleton should define and confine the areas of controversy in a short numbered list.

• Court of Appeal (Civil Division): Permission to appeal from the order of His Honour Judge Behrens dated 25 October 2001 was refused and the application was dismissed.
• High Court, Chancery Division: The petition under section 459 of the Companies Act 1985 was dismissed.